标题:Innovating risk management and hedging strategy for convertible bonds using support vector machine
作者:Shen, Chuanhe ;Wang, Xiangrong ;Guo, Linna
通讯作者:Shen, C
作者机构:[Shen, Chuanhe ;Wang, Xiangrong ] College of Information Science and Engineering, Shandong University of Science and Technology, Shandong, 266510, Chi 更多
来源:Proceedings - 3rd International Conference on Business Intelligence and Financial Engineering, BIFE 2010
出版年:2010
页码:341-345
DOI:10.1109/BIFE.2010.86
摘要:Convertible bonds (CB) contain many kinds of embedded options and the complexity of their interaction makes hedging exposures of CBs challengeable. In order to tackle the issue, this paper introduced support vector machine (SVM) approach to overcome the shortcomings of traditional pricing methods and enhance hedging efficiency. By feature selection, kernel function determination and parameter optimization, SVM-based model proved to be more effective in that it can deal with complicated interaction among options of CBs and nonlinear and time-varying correlation among variant variables. On the basis of the proposed model, an innovated hedging strategy for CBs, based on delta-gamma-neutral hedging methodology, was explored in terms of the sensitivity of CB's value to the underlying stock price. Moreover, the model brought out great flexibility for risk management and hedge ratio determination by coping with neatly stochastic changes in volatility of the underlying stock, with remarkable advantages in hedging performance in empirical analysis over the traditional methods. © 2010 IEEE.
收录类别:EI
资源类型:会议论文
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